OPTIONS-Compaq vols stuck, volume moderate on news
CHICAGO, July 23 (Reuters) - Implied volatility stuck at familiar levels Friday and volume stayed contained in options on Compaq Computer Corp <CPQ.N> despite news that some traders had expected to roil options activity.
Implied volatility moved relatively little in the option, staying close to about 46 percent in the August 25s, not what some traders expected given the stock's 24-5/16 to 25-13/16 range Friday.
The one-month historical volatility of the stock is about 44 percent.
Compaq late Thursday surprised some analysts by naming little-known Michael Capellas as president and chief executive officer. Capellas has been Compaq's acting chief operating officer since June 2.
After the appointment, Morgan Stanley Dean Witter upgraded Compaq, the big personal computer maker, to outperform from neutral and set a $34 price target. But ABN AMRO said it would not be surprised to see short-term weakness in Compaq until Capellas proves himself.
"It doesn't look like they (traders) think much of it," said Mark Cormier, a market maker in the options at the Pacific Exchange (PCX), of the news. "(That's) not to say it's a bad thing that he (Capellas) got appointed...but this is supposed to be Compaq's day" yet the stock slipped after an initial rise.
Compaq shares ended down 1/4 at 24-3/4 Friday on New York Stock Exchange volume of 10.2 million.
"There's been some speculation in front of it," said Paul Foster, investment strategist, 101wallstreet.com. "It's more of a wait-and-see attitude."
Cormier also said volume Friday was only moderate rather than running at the brisk pace that he figured might have accompanied the apparently conflicting recommendations.
"I think there are many more call sellers than call buyers," he added, noting that the public appeared to be closing out some positions.
On Friday, roughly 11,500 calls and 3,700 puts changed hands on the PCX.
"It's a lot, lot lower," agreed Foster of Friday's volume versus the average in the last month of some 31,000 contracts.
((Laura Jacobs, Chicago Derivatives Desk(312)408-8750
chicago.derivatives.newsroom@reuters.com))
July 23, 1999 5:12pm
Source: Reuters
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